Starting any business or venture has a price. The long and exciting journey of setting up venture needs a fuel named capital. According to survey 95% of the businesses which are failed in the 1st year itself are due to lack of the funding. After you have conducted market research, obtain how much finance you will require till your business start generating revenue and adequate profit. It’s better to overestimate budget in the beginning itself.
If you are planning to leave your current job and then setting up business, then you have to make provision for your personal expenses as well. As, from very beginning business will not start generating revenue. Even if you have best business plan it will not guarantee that it will get funding very easily.
Please diversify your sources of finance it will allows your business to performs better. As per famous quote “do not put all your eggs in one basket,” this will be true in this case. Following are the summary of sources available for finance for start-ups.
- Bootstrapping:- For first time entrepreneurs, it is ideal option. You can invest funds from your own savings or can get loan from family and friends It has its own advantages as it’s easy to raise, less compliances plus low costing etc.
- Loan from Banks and other financial institutions:- You can take loan from banks and financial institutions. In general, banks and financial institutions give loan with very good track record of the Company. In case of start-up loans typically they required personal guarantee of entrepreneur. For them good idea is not enough it should be backed up with very strong business plan.
- Seeking funds from Venture capital (VC) funds and Angel Investors:- If your idea is very good enough then you can seek funds from VC funds and Angel investors as well. But the will invest in the business with equal equity participation. They expect a very high return on investments and very often they sell shares in public once a company starts generating profits.
- Government grants and subsidies:- Currently, Government have initiated various grants and benefits for start-ups. In order to boost innovative products, government has launched various scheme for e.g. Micro Units Development and Refinance Agency Limited (Mudra). There are various state government schemes also available. The Government has given Income Tax exemptions for 3 years to start-ups, 80% rebate in IPR registrations and Credit guarantee schemes available for start-ups.
For small ventures, the budget will be limited and constraint. You have to manage your expenses very effectively. It doesn’t mean you should cut down your necessary expenses, but manage your expenses effectively. Try to put systems in place so that you can focus on your sales and marketing rather than day-to-day management. Nowadays, sharing office space is one of the ideas for. e.g. Regus. Likewise, people provide scanner and printer facility also for corporates like Hit-scan and outsource2 India so that you don’t have to spend huge expenses on the fixed assets of the Company.
By taking advantage of one of the options, your business can increase the chances of surviving in this competitive market. You should take advantage of the existing and upcoming market opportunities. You should interchange your sources of funds to avail the flexibility and overdependence on one source.
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